Business

10-Month-Old Startup Buys 93-Year-Old Business for $100 Million

Before Jeffrey Raider and Andy Katz-Mayfield even launched Harry's, an online service for men's grooming products, they had their eyes set on a first acquisition. The pair wanted to buy an old German razor factory for $100 million.

That isn't how most new startups operate, but then again this wasn't Raider's first time around. Raider was one of the cofounders behind Warby Parker, the popular e-commerce service for eyeglasses founded in 2010 and currently said to be valued at around $500 million.

In 2011, Raider received a call from Katz-Mayfield, a friend, who complained about his experience buying razors and shaving cream at a store. "Could you do it better?" Katz-Mayfield asked. That conversation sparked the idea for a company that would sell high-quality shaving products for a reasonable price to compete with more established businesses like Gillette and The Art of Shaving and upstarts like Dollar Shave Club. But it turned out to be harder than they thought to find high-quality razors.

The founders searched for a manufacturer with the know-how and willingness to would work with them on producing the razors. "For awhile we thought we couldn't even build [it] because we couldn't find a manufacturer whose blades we'd be proud to sell," Raider tells Mashable. That changed in late 2011 when they came across Feintechnik, a German razor manufacturer founded in 1920.

"In late 2011, I pitched our investors that we should buy the factory," he says. "They asked how much it would cost. We said $100 million. They said, 'Okay, why don't you go build your brand first?'"

For the next year, Raider and Katz-Mayfield focused on building up the company, raised a seed round of "a few million dollars" and officially launched Harry's in early 2013. In its first nine months, Harry's sold "well over" 100,000 shaving kits — a razor, shaving cream and set of blades — and opened up a barbershop location in New York.

Now, a little more than a year after that first conversation with investors, the founders finally got their wish. Harry's announced Wednesday that it has raised $122.5 million from investors in equity and debt, and used $100 million of that capital to purchase the German manufacturer.

To put that another way, a 10-month-old startup just purchased a 93-year-old business for $100 million.

The Feintechnik factory in Germany that Harry's just bought for $100 million.

Raider touts the deal as a "transformative event" for Harry's which will allow it to "vertically integrate" its business so that it controlled its supply chain and builds relationships with customers. With the deal, Harry's now finds itself with a factory and 427 additional employees. The startup had just 35 employees prior to the acquisition.

"Over time, a bunch of people on our team have gotten to know a bunch of people on their team," he says, noting that Harry's had a working relationship with Feintechnik long before the deal.

While the vast majority of the new capital went towards buying the manufacturer, Harry's will still have an additional $22.5 million to play with. The plan is to use the money to invest in new and better shaving products, as well as to possibly expand its offline presence.

"The cornershop in New York has done exceptionally well and we are thinking about how we can continue to develop strong relationships with customers through brick-and-mortar stores," Raider says.

Investors in the funding round included Tiger Global, Thrive Capital Partners, Highland Capital and several other firms.

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